Prices on Lockheed Martin's (NYSE:LMT) F-35 uber-fighter just keep coming down. At the same time, though, Boeing (NYSE:BA) is mounting a furious fight to convince fighter jet shoppers to consider two of its models -- the F/A-18 Super Hornets and F-15 Strike Eagles -- as even cheaper ways to build an air force.
Who will win this budgetary dog fight? Here in the U.S., I've argued that I think the advantage is shifting in Lockheed Martin's favor as it keeps whittling away at the price tag on its F-35 Lightning II stealth fighter jet. But overseas, the battle's still up for grabs.
This month, the battleground is shifting to a new theater: Germany.
Whose planes will fly in Germany's skies?
As Reuters reports, Germany is gearing up to modernize its air force, which consists largely of Panavia-built Tornado jets that date from the 1970s. Germany has invited Lockheed Martin to bid its F-35 fighter jet for the contract, and it asked Boeing to bid its F/A-18 and F-15 as well. Rounding out the competition, the Eurofighter consortium will bid its Typhoon fighter jet.
In total, the Germans are looking to replace as many as 85 of its oldest Tornadoes with new modern jetfighters, around about 2030. Assuming a one-to-one exchange of old jets for new, and taking $95 million as the ballpark price for a new Lockheed F-35A conventional take-off-and-landing warbird, this implies that Germany could ante up as much as $8.1 billion for its new air force.
That's if Germany goes with Lockheed, of course. New fighters from Boeing would probably come a bit cheaper. The U.S. Air Force, for example, recently contemplated a plan in which it would fill gaps in its ranks with one of two different Boeing aircraft -- F-15s or F/A-18s -- as cheaper alternatives to Lockheed's F-35. In fact, Boeing says even the most advanced version of Boeing's F/A-18, the "Advanced Super Hornet," would cost only $79 million per unit -- about 17% cheaper than Lockheed's F-35.
The problem for Boeing is that price might not be the only object in this competition.
The generation gap
Capability is also an issue. Reuters quoted German Luftwaffe Chief of Staff Lieutenant General Karl Muellner specifically stating that Germany needs a "fifth generation" radar-avoiding fighter for its air force. The F-35 meets that requirement. Boeing's fourth-generation planes -- and the Typhoon as well -- do not. (In a similar contest held in Korea four years ago, buyers opted to buy Lockheed's more expensive F-35 over a cheaper F-15 variant from Boeing specifically because of the F-35's stealth capabilities.)
Another factor working in Lockheed's favor is that many of Germany's NATO allies have already placed orders for the F-35. Denmark, Italy, Netherlands, Norway, Turkey, and the United Kingdom -- they've all bought tickets on the F-35 express. If Germany picks any plane other than the F-35, it risks sticking the Luftwaffe with a technologically obsolescent airplane that may not play well with others.
Of course, there's no guarantee Germany will stick with its position that fifth-generation capability is a sine qua non. To the contrary, the fact that the Luftwaffe has invited three fourth-generation fighters into its competition suggests it might very well consider a non-stealthy aircraft. In that case, though, Boeing has something else to worry about: Eurofighter's Typhoon.
According to data from Flightglobal's World Air Forces 2017 report, Germany's air force currently boasts 115 Tornados in combat and electronic warfare configurations, versus only 92 Typhoons. But among training jets, the balance leans the other way. Among Germany's trainers, 24 are Eurofighters, compared to just seven Tornadoes. (Germany, by the way, is a co-developer of both the Typhoon and the Tornado.)
The fact that Germany trains more often on the Typhoon than on the Tornado suggests a fondness for the Typhoon that could sway German buyers toward choosing the local option over foreign-made planes from Boeing and Lockheed. What's more, by creating an all-Typhoon fighter force, Germany would presumably benefit from savings on training, maintenance, and parts costs -- much like Southwest does from flying an all-Boeing 737 fleet. That's a strong argument in Eurofighter's favor.
Until we hear otherwise, my hunch is that neither Boeing nor Lockheed can count on winning this contract just yet.